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Micro sector closures impact Lasco Financial Services

High credit provisions were reflected in the results for Lasco Financial Services Limited (LFSL) for the year ended March 2020.
As a result, loss per share was 4.43 cents compared with 22.28 cents earnings per share in the previous year.

Directors explained in their report to shareholders that a high provision for credit losses made by subsidiary LASCO Microfinance (LASMF), based on customer payment trends, were compounded in the last quarter by the COVID-19 pandemic and its expected impact on the segment served.

The segment revenue is comprised of J$1.6B from the money service business and J$900M from LASCO Microfinance.

The increase in revenues was inadequate, however, to compensate for the 38 per cent increase in expenses from J$1.6B in the previous year to J$2.3B which resulted in a consolidated net loss of J$56.9M compared with net profit of J$254.2M in March 2019.

Company managing director said that COVID-19 created “a tidal wave of disruption affecting all of our business lines.”

The company’s remittance business, she noted, “exhibited the most resilience as we were able to efficiently deliver the service to our new and existing customers both through legacy cash channels and digital channels.”
However, as the Government of Jamaica navigated its response to the pandemic, Hall Tracey outlined, several businesses became victims of curfew hours, quarantine restrictions and fall off in demand for their goods and services.

Business segments most impacted are those that rely heavily on Lasco for microfinancing including bars, small shops, tourist and school-related entities.

Consequently, as a precautionary measure, LFSL recognised an additional $61M in expected credit loss.

Hall Tracey noted that measures have been in place to assist our customers through insurance claims, payment moratoriums and restructuring.

The impact of COVID -19 was less evident on LFSL, the parent company which yielded an eight per cent increase in total income and a 17 per cent increase in net profit, closing the year with J$227.8M.

Total cash (cash and bank balances and short-term deposits) increased 100 per cent to close at $722.9M. 40 per cent of this growth occurred within the last quarter, accelerating from the third quarter.

The company increased focus on collections, and reduced lending at the onset of COVID-19, resulting in loans and advances decreasing by three per cent, from $1.9B to $1.8B.

Adoption of  IFRS 16 for leases over US$5,000 per annum with tenures over twelve months also resulted in an increase in assets of $190.5M for right of-use assets, a lease liability of $217.5M and $23M for interest expenses and foreign exchange adjustment included in expenses.

Total assets increased by 1.7 per cent, whereas total liabilities increased by five per cent and total assets is 1.6 times total liabilities.

Hall Tracey said in the letter to shareholders, “The economy is slowly reopening but the lingering impact from COVID-19 still affects our business.

“Our main course of action has been to reduce expenses and preserve cash and to assist our customers to access our services digitally and manage their own cash flow.”